1st Legal Marijuana Stores Are Open In Massachusetts, But Industry Is Far From Mature

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WWR Article Summary (tl;dr)The roll-out in Mass. has not been easy for many entrepreneurs. Cities and towns are trying to reconcile with state legislation. Additionally, there are a lot of unanswered questions regarding finance, safety and distribution of product.

The Republican, Springfield, Mass.

After years of preparation and debate, legal marijuana is now a reality in Massachusetts.

Any adult can walk into a store, pay cash and walk out with a joint, which they can smoke, legally, in their home.

But the roll-out of the first marijuana stores is only the beginning. In the coming year, marijuana entrepreneurs and regulators will face a host of challenges, from enabling small businesses to enter the market to writing regulations for marijuana cafes to figuring out how to address drugged driving.

Cannabis Control Commission Chairman Steven Hoffman said he does not anticipate a fully developed industry even by the end of 2019.

"We're obviously going to have many more stores and many more types of establishments," Hoffman said. "I think it will be a much bigger industry, but not yet mature and stable by the end of the year."

The first state-sanctioned recreational marijuana stores opened in Northampton and Leicester on Nov. 20, two years after Massachusetts voters passed a ballot initiative legalizing recreational marijuana. Since then, the Cannabis Control Commission has been approving licenses at a steady pace.

As of Jan. 20, there were eight stores selling marijuana to the general adult market. Collectively, they had conducted $23.8 million worth of marijuana sales in the first nine weeks.

"It's taken too long, but I'm happy to see it finally happen," said Will Luzier, political director of the Marijuana Policy Project of Massachusetts, who led the fight to legalize marijuana in Massachusetts.

All of the first licenses were given to existing medical marijuana dispensaries, and most of the first recreational shops are in the same locations where medical marijuana was already being sold.

The roll-out has not been easy for many entrepreneurs. One of the biggest bumps has been the need to find a location.

Many cities and towns implemented moratoriums, and some instituted outright bans, on marijuana businesses. The moratoriums, which were meant to give towns time to write planning and zoning regulations, mostly expired at the end of 2018, which could open up many more potential opportunities.

"One hundred thirty-five cities and towns that were sitting on the sidelines for the first year of operation are now coming off the sidelines," Hoffman said.

But a continuing challenge has been the host community agreements that marijuana businesses must negotiate with municipalities. Although state law caps the "community impact fees" that cities can charge at 3 percent of sales, it does not explicitly preclude municipalities from requiring donations to nonprofits or charities or imposing additional fees. Practically, almost all the host agreements so far require marijuana businesses to pay more than 3 percent of sales. That is in addition to state and local taxes.

The Cannabis Control Commission has asked the Legislature for authority to regulate host community agreements. It will be up to lawmakers whether to pass a legislative fix.

In the meantime, an advocacy group representing marijuana growers is expected to take the commission to court. The growers say the commission already has authority to regulate these agreements.

The host community debate is one part of a larger issue, which is the challenges facing "equity" applicants. State law requires the Cannabis Control Commission to ensure that communities disproportionately affected by enforcement of marijuana laws -- often black and Latino communities and urban cities -- are able to reap the benefits of the legal industry.

The commission gave priority status to some "economic empowerment" applicants, but so far none have opened businesses. The commission is also starting a "social equity" program, which will offer training, technical assistance and guidance to people who have drug records or are from communities disproportionately affected by marijuana enforcement who are trying to enter the industry.

The question will be whether those programs are enough in an industry that also includes multistate marijuana conglomerates.

Kamani Jefferson, president of the Massachusetts Recreational Consumer Council, said it is difficult for small business owners to get the initial money needed to pay for things like legal fees and acquiring land. Only a small number of banks accept marijuana business, since marijuana is still illegal at the federal level. Those banks that do accept marijuana business charge high fees.

"As much as they're trying to bring down the barrier of entry, it's still a high barrier to get into this industry," Jefferson said.

Daniel Delaney, owner of Delaney Policy Group, who lobbies on behalf of medical and recreational marijuana companies, said he would like to see the focus on social equity expanded beyond just ownership to look at who holds management and career-track positions in marijuana companies.

"Part of what the Legislature said, that there has to be meaningful participation in the industry, has become shorthand for how come there are not more black and brown people having licenses," Delaney said. "If we look at that in a more sophisticated or nuanced way, it might create some entry opportunities. ... If there were half a dozen CEOs who were black, Latino, women or veterans ... it would build a pipeline to put diversity in the industry in a good place five years down the road."

One section of the industry that could provide additional opportunities for all types of entrepreneurs is the launch of social consumption and home delivery licenses.

By summer, the Cannabis Control Commission plans to write rules to start licensing home delivery services as well as "social consumption" establishments, which could mean anything from marijuana-infused restaurants or pot bars to yoga studios or movie theaters that sell marijuana.

Questions that need to be answered include how municipalities can regulate or ban these businesses, whether serving sizes will be limited, and what checks will need to be instituted to ensure minors cannot get marijuana.

Another focus this year will be on enforcement. In addition to ensuring that marijuana growers and retailers follow state law, state regulators are already grappling with how to address a potential increase in drugged driving.

Gov. Charlie Baker introduced a bill that would implement the recommendations of a special committee charged with addressing drugged driving. These recommendations include applying the state's open container law to marijuana and automatically suspending the license of a driver who is stopped and refuses a drug test.

These attempts at regulation raise legal and scientific questions, since there is no single scientifically proven test that is fully accurate in testing for impairment from cannabis.

Despite the challenges of a new, highly regulated industry, marijuana advocates note that the consumption of marijuana is nothing new in Massachusetts.

"It's a huge market, but it's not a market that the licensed companies are creating," said Karen Munkacy, CEO of the medical marijuana company Garden Remedies, which is working to open recreational stores. "It's just we're taking products that are being sold by criminals and are untested and can be unsafe and providing product that its tested, safe and taxed."